2nd Place: A Winning Business Strategy
There is a great story about the battle for dominance between McDonald’s and Burger King. There was a time - just like when television only had 3 channels - that you really only had 3 or 4 choices for a quick meal. McDonald’s was the category leader (although not a phrase used at the time). They had process and procedure. They built an empire, including an efficient real estate empire. They sent teams to scout new restaurant locations and worked with local owners to determine the exact best place to expand their restaurants. Traffic patterns were analyzed and detailed information was obtained to negotiate the land and start building.
Burger King just watched … and then built across the street.
Being a category leader has perks. It validates you in the market. It has great cache and bragging rights. It feels good. It is absolutely the goal for your organization to lead a category — to be numero uno! Except when 2nd or 3rd place is the better option.
Why Not #1
There are some great books out there for category creation and being first, best-in-class, for your category. But this is an expensive business strategy. Back in the days when I was a product manager in CRM, we saw quite a few companies that tried to put a letter in front of CRM to “claim a category” - eCRM, SCRM, UCRM. My guess is that there were probably 26 of them. Everyone tried to brand their way into a category and to lead. The problem is that category creation is not a branding exercise, it is a product initiative, a product-market fit engagement, a market sizing program, and a company strategy to be top of mind and win customers in a whole new area of their lives. Slapping an ‘e’ on the front of an acronym won’t do it.
Category creation is costly and expensive and arduous. It has a huge payoff — but have seen more than one brand smash up against the cliffs of category because they didn’t have the Inigo Montoya drive to scale the treacherous rocks.
We are Number 2
2nd Place Strategy
Does the Burger King strategy make sense for you? It can certainly be less costly to just follow along the leader. Think of this as drafting behind them. They spend more and it takes a bigger toll at times to be first. It is certainly less to be the next person in their footsteps. If you think of this as resources, costs, and energy — even emotional energy — letting someone move in front saves you across all of those factors. That money, effort, and energy can be used in other places. You can focus on being a better product, or finding a better fit with your customers. You can branch into new directions — markets, products, geographies — with this new found energy.
This doesn’t mean coast. And you likely wont win by being lazy. This is about being smart with your limited resources to make impactful decisions for your business. What is it that you do better than anyone? Does your customer know and appreciate that value? What value do you think you are delivering to your customer and what does your customer still need or want?
The category leader may be thinking of some of these, but they aren’t going to be all things to all people. Find your place and go win
Can you take the Silver?
Can your ego handle being in second place? This is a good question. If you don’t have bragging rights, will that impact your desire to be first? Will it impact hiring if they go to your competitor instead because they consider that winning? Think about the real implications of not being first and what that might mean to you and your brand. It is one thing to say you can accept not being first, but going into that decision eyes wide open.
Number 2, but right for you
If you think about the analysts — your Gartner and Forrester and whatnot — they will be the first to state that their pole position company in the research is not always the best. They steer toward recommending what is best for you, not the market leader — often not even willing to use that term. Most organizations have a formal vetting process from a RFP (request for proposal) to just evaluating the pros and cons of a few solutions to find the best fit. You may be second in the polls but if your product has better alignment or a better price point than your competitor, you win.
The old joke is that no one ever got fired for choosing IBM. That is true, but I wonder how many of them had a seat at the table when they ripped it out and went with the competitor. Being the market leader doesn’t just mean they win all the deals and doesn’t mean that being second still can’t win.
Being in the shortlist or in the top tier may be enough to get you evaluated and considered. You may be the best fit after all.
Closing Puma thoughts
A great place to close is the conversation had by the CMO of Puma. They knew they could not outspend or out innovate Nike. Going head to head with Adidas was folly. Reebok had a comfortable market lead on them. At best they could hope for was 3rd, more often a comfortable 4th. So they found their market in the spot. Their customer was not the person waking up at 5am to go jog, but the person who was coming in from the night at 5am. The weekend rugby player or the DJ. The player sliding into the keg at second base. Their winning strategy was not to be first in category but to play to their customers and win — comfortably from 4th place.
Oh, and their marketshare has tripled over the last 3 years.